Replies to post #631009 on Fannie Mae-No Politics (FNMA)

[Louie_Louie]

And that will be proof positive for anyone with any doubts that the judicial is in cahoots with the government. = banana republic
Sadly

[YanksGhost]

It's been loosely estimated that a $30 B tax deferral would take 6 to 7 years to realize. I think this makes any $125 B deferral unimplementable.

I wouldn't rule out some other gambit, however.

[kthomp19]

I foresee that they will allow a credit of $125 billion or so to be applied to the GSE's books and core capital.....without the money actually being immediately returned by the treasury.

I don't see this happening at all. The purpose of capital is to be in a first-loss position, and a tax credit doesn't absorb losses.

By law, core capital is retained earnings plus non-cumulative preferred equity plus common equity plus additional paid-in capital. Which of these four things would be increased by such a credit?

An easier solution is to have Treasury convert the seniors to commons, sell those commons, and pledge to give FnF the first $125B of the proceeds. Treasury never has a net cash outflow and core capital ends up being right around Calabria's standard of $152B.